Ladies and gentlemen, welcome to Siemens Gamesa Q2 Results Presentation IR. My name is Rica, and I’ll be the call operator for today. And I will now hand over to our host Xabier Zaldua to begin today’s call. So, Xabier please go ahead when you ready.

Good afternoon ladies and gentlemen and welcome to our Q2 fiscal year presentation that corresponds to the January-March quarter. Before we start, let me draw your attention to our disclaimer in Page 2. The annual release will be conducted by our CEO, Andreas Nauen; and our CFO, Beatriz Puente. We will finish with our Q&A session; we will take your question over the phone.

Yes, good afternoon, and good evening, and thank you for joining this call at the slightly unusual time, which is due to a board meeting held earlier today and the content we discussed that. It is important for us that we share this with you in new time and hence we decided to have the call tonight. We appreciate you dialing in especially at this time. And we will of course endeavor not to delay your weekend plans any further. I’m joined as Javier by our CFO, Beatriz Puente, and as always, she will provide you with an overview for the results for the second quarter of the fiscal year 2021, before we then give you the opportunity to ask any questions. The short summary of our quarter – of our performance this quarter is pretty easy and straightforward. This quarter enhance the first half year has been positive for Siemens Gamesa with solid performance from Offshore and Service particular. The restructuring process for Onshore continues and we are surely not there done yet – not done yet, but overall, a good first six months of the year 2021. I would then like to draw your attention to Page 4 of our earnings release presentation, which addresses the key points of Q2. The revenue is slightly above €2.3 billion with a Q2 EBIT margin of 4.8%. This performance is a continuation of a good quarter one, and leads to half year results of around €4.6 billion revenue and 5% EBIT for this first half year. These results were driven by a strong performance in Offshore and in Service. The EBIT performance in the first half year has also benefited from a reduction of the Offshore turbine failure rates and this effect we already explained to you in Q1. Q2 – so the recent quarter was supported by an upfront loading of manufacturing activity in Offshore prior to a very busy installation summer. So all in all, for us a quite satisfying start to the year. Let me come now to the second and very important point of today’s earnings release. That is our guidance. Based on the good visibility, we have now for the operational business for this year. We have narrowed our revenue guidance down to €10.2 to €10.5 billion. This guidance is the result of all the order deferrals especially in Onshore and project execution delays driven by a number of factors included COVID impact in few countries. The margin guidance of 3% to 5% is maintained. It is supported by the H1 EBIT performance, but we also see some headwinds in the second half. We expect performance to be impacted by a number of factors, such as higher supplier cost and raw material costs and by a lower contribution from Offshore as production shifts from the 8-megawatt turbine to the 11-megawatt turbine that ramps up in quarter four. And then on the positive side, we have efficiency measures linked to the LEAP program, which will help to cushion this impact.

Thank you, Andreas. Good afternoon to all and thank you for joining our Q2 results presentation. In the following pace of the presentation, I will cover the group key financial highlights in the second quarter and also for the first half of the year. If we go to Page 15 of the presentation, our top-line as Andreas has covered has been impacted by order deferrals and some project execution delays, and also by FX, while EBIT margin pre PPA and before Integration and Restructuring costs was stable by the group performance in the Offshore market and Service activity in both Q2 with an EBIT margin of 4.8% and for the first half of the year 5% margin. The key figures for the period are €2.3 billion in revenues that means an increase of 6% year-on-year in Q2, and €4.6 billion, an increase of 10% year-over-year on the first half of the year. Both supported by the Offshore market and also the Service activity with Onshore price execution is still lagging but less than we compare with previous year. Onshore and Service revenues is still impacted by a strong FX impact mainly is driven by the U.S. dollar and Brazilian real I will cover later on the impact. On the EBIT margin pre PPA and before Integration and Restructuring costs of the 4.8% will imply a 3.3 percentage point improvement when compared to Q2 last year, and a margin for the first half of 5% an increase of 7.5 percentage points compared with the previous period of our last year. Both Q2 and the first half margin evolution is driven by strong performance in Service and also from a larger contribution from the Offshore business to the WTE revenue. The group profitability comparison also benefited from the final delivery of projects that hinder our performance last fiscal year, also with lower costs associated to the pandemic, and also lower cost in our Indian operations would compare with last year. Integration and Restructuring costs amounted to €71 million in Q2, and €118 million on the first half of the year. As we anticipated also in our Q1 earnings release, restructuring costs has increased in line with the progress in the restructuring exercise. In Q2, the increase is link to the agreement reach for the announced closure of Somozas and Cuenca. Restructuring costs amounted to €40 million in the quarter and €60 million in the semester. Integration costs amounted to €31 million, €58 million in the semester. That includes the effort of the group on IT and also the improvement on the corporate processes and the integration of Senvion and Vagos.

Thank you very much, Beatriz. And I'll finish then first with a look at the overall wind market that you can see on Page 21. And the first short to look back in 2020, we saw an absolute record installation of the wind market with more than 110-gigawatts that was mostly driven by the Chinese and the U.S. market and we then see a stabilization in 2021. And then especially interesting of course, the next three years 2022 to 2024 when you can see that offshore will double more or less in the installed capacity every year and onshore will stabilize maybe with a slight decline, but overall a very stable market with a growing share of Offshore, and then from 2025 onwards we will then see real growth Offshore then getting may be to – sorry, at Offshore getting to 24 gigawatts every year 25 to 27 and beyond that, even above 30 gigawatts, but also Onshore it is expected to grow in that period after 2025 again, so clearly we see that growth will come back into the wind industry and especially in the Offshore. In the offshore segment where we are Siemens Gamesa are particularly strong. This is wind turbines or wind farms of classical business only. On top of that, we can also see additional demand, which I'd like to highlight on page 22, coming from green hydrogen. Of course, this will only become a major business in the second part of the decay. But nevertheless, it's important to mention that we from Siemens Gamesa already now are working on that and positioning the company in that vastly growing market. You can see on the right side if a few highlights, we are developing an offshore turbine in order to produce hydrogen directly at the turbine. We do this in partnership with Siemens Energy. We are working also on electrolyzer solutions, where the electrolyzer is located at the substation level, which is that all closer to the consumer facilities. One example project on that is also a project that we do together with Siemens Energy in Chile. And on top of that, we are also developing now solution for Brownfield applications, which is an electrolyzer, integrated into an existing wind farm. I mentioned previous presentations that we have already such a project life in Denmark where we test the technology, but also the business model and the business opportunities that this provides for the owners of the existing wind markets. I would like to finish the presentation then with a final look at our guidance. We have narrowed the revenue guidance as mentioned before from €10.2 to €10.5, reflecting the impact from all the intake but also slight delays in project execution driven by sometimes clients planning or by the pandemic, the EBIT margin guidance range we maintain, considering the various aspects that we already mentioned, the strong first half year performance, the ongoing efficiency measures that the LEAP program delivers, but also we see headwinds coming at us, which is the first the lower contribution of offshore, especially in the last quarter due to the change of turbines, but also the influence of raw material price increases and a slight volume reduction. But again, overall, I would say very good quarter for Siemens Gamesa. And with that, I would like to finish our presentation and hand back to you for questions.

The first question we have from the phone lines today comes from Vivek Midha from Citigroup. So, Vivek your line is now open.

Thanks very much. Yes. Thank you very much for taking my questions. I had two if I may. Firstly, can I just get some more color around the composition of the revenue guidance card? Is it only in Onshore you've highlighted India and Brazil? Or is there also any in Offshore perhaps to do with the Offshore project launch and the Offshore new product launch? And secondly, you've highlighted the cost inflation backdrop; given that context how confident are you still in your previously stated ambition to get the Onshore business to breakeven by 2022? Thanks very much.

So, let me first address the revenue and the effect that we saw there and maybe Beatriz can then address the second question. The revenue guidance is mostly affected by as I said late order intake in Onshore, in Offshore you know that we have normally an excellent coverage. So, the delayed order intake in at the beginning of the year in certain markets did not allow us to produce and to install as many turbines this year as we had planned and that is mostly an Onshore we have also a very, very small effect from customer driven delays in Offshore, but this is only a very minor effect, so mostly the influences coming from Onshore. And Beatriz, do you want to have…

Regarding – as we have highlighted the potential risk on raw materials that I think, of course, is market driven. And the still answer that the about where the raw material prices will go by the end of this year and on 2022? It just to be seen assess what will be the impact or the group level on Onshore of course, our aim has been highlighted is to drive Onshore to profitability and breaking endpoint and you will be subject as you said, one of the things that might impact that will be the raw material prices, saying that all the plants are ongoing on all initiatives linked to LEAP are well on track to get to that profitability, but that has said, we will update based on the raw material impact.

Okay. So just to be clear, I guess we’ll only know about when you have a bit more visibility perhaps when you give your process of full year guidance later in the year, is that fair to assume?

That’s of course, as you can tell, we are in the process of preparing, they buy it and of course that will be there to share that do course.

Okay, understand. Thank you very much.

We now have the next question from Gael De-Bray from Deutsche Bank. So Gael, please go ahead.

Thanks. Thanks very much for taking my questions. Good afternoon, or good evening, everybody. I have a couple of questions, please. So, the first one is really a follow-up on Vivek’s question. There was clearly a very strong contribution from Offshore to the margin performance this quarter. But I’m a little bit under the impression that the turnaround process of the Onshore business is running a bit behind the original expectations, and even before we start seeing some of the materials, headwinds in the next few quarters, so I’d like to get your views on this. And secondly, given the tension on the supply chains and the surge in still caused and in freight, I was also a bit surprised that Onshore prices were still down year-on-year. So, I’d like to get your thoughts on this as well and better understand perhaps the competitive dynamics and the kind of customer resistance you might be facing. And so I just quick one, third one and the working capital move this quarter not really positive given the big contract winds in Offshore so are you seeing some pressure to a degree from your customers on prepayment terms now?

Good. Maybe, you had three question progress and Onshore turnaround pricing in Onshore, and then working capital, and payment in terms from customers, I will address the first two. Progress in Onshore turnaround, we are making the progress that we plan to make. We clearly for example, addressed the issues in India that we had, that we changed our business model we posted business in India under new feet and reduced our scope, we step out of project development that is going as planned. Also, if you recall one of the measures, and I mentioned that was the consolidation, which is actually the reduction of our Onshore manufacturing capacity, we already closed one factory earlier. And now we have close to two further factories simply to adjust our capacity, and thus bringing down the under utilization. To give you a third example, also that was to the development of the next generation turbine, which is the 5.X. Also there we are making good progress, the two prototypes for the 5.X 155 and the 5.X 170, they are both installed and the serial production for the first project was going on. So clearly we are making the progress that we thought and that we planned. But as the Beatriz is highlighted also in her previous answer, we also see headwind, for example, from the raw materials that we have to compensate and that is what we are currently looking at, to address that issue as well. Then pricing in Onshore, and the pricing that you see and that is reflected in the last quarter is of course the result of negotiations and proposals that we did over the last year, then what we are clearly pressing forward with now especially in light of the steel price increases and logistics, to pass on more and more of that to our clients. And we did not have these clauses in many contracts in the past and but since we saw the high expense year and beginning of this year, we are putting that more and more into the market. But you of course cannot see that already in the average selling price of the last quarter. And then on working capital and payment conditions, do you want to have to cover that Beatriz?

Thank you for the question. Answer is straight to the question is no, we are not seeing not any change on payments terms from our clients. And then the reason behind that, kind of working capital performance is also due to the very good performance of year end, as of last year. And now we had also some overflow of payments that come from the end of last year that is impacting also the first quarter, and therefore, the performance of the working capital that now we are more on the way to normalize those working capital levels. So, you will be able to see through those advanced payments of Offshore or the trades.

Thank you. We now have a question from our Akash Gupta of JPMorgan. So Akash please go ahead when you’re ready.

Yes. Hi, everybody. My first question is on Offshore orders. So, I think we have two very strong performance in the quarter and you said you expect more to come. My question is on the facing of these more orders to come should we expect something in Q3 or it would be more likely in Q4, given the lumpiness that we have seen in Offshore orders? And maybe a follow-up to that question is on your pipeline, are there new projects out there which could lead to expanding this 7-gigawatt, 7.5-gigawatt offshore wind pipeline that you have right now? And then my second question is on guidance. I think this revenue guidance of €10.2 billion to €10.5 billion is in constant currency and in Q2 alone you had €99 million of FX headwind. So maybe if you use current exchange rates then is there any number that you can give for FX headwind for the whole year? Thank you.

Good. Thanks for the question, Akash. I’ll address the Offshore orders and the pipeline and maybe Beatriz can answer. We always split two to one and you take the last question. So the offshore orders in queue. You asked what further orders and do we expect this year and for which quarter? Clearly, we’re expected I mentioned that Sophia would come in Q3, we had another order than expected in Q4. I think the pre-pone, the customer actually pre-pone, the order for Sofia into this quarter. And it remains to be seen whether the remaining orders that we expect to become come in Q3 and Q4 also, as we saw with Sofia, sometimes things go a little faster. So difficult to say, but at least, I’m very satisfied with the general flow of orders from the pipeline into firm orders. Then, Akash, you asked about the pipeline 7.5 gigawatts, whether there are more orders on the horizon that could add to that pipeline, then yes, of course, we are progressing with negotiations, further order firm based, and in several countries. And we expect also that pipeline to grow the most exciting and that is why I highlighted that, of course, so many times, the auctions and amongst the auctions, then the CFD auction that will take place around here, and in the UK, that is nothing that will come anytime soon. And there’s still six to nine months ago. But this is clearly one of the most exciting markets at the moment. And we believe we are well positioned, if I look at the negotiations that we currently do about that, we also remains to be seen only when the auction is over, you actually know. So that would then have a large influence on our pipeline in case we are successful there, which we of course hope. That is with regards to the pipeline, and then on the revenue and the FX influence on that.

The impact of potential impact on the second half of FX that are written, we prefer to provide, the guidance at cost on FX, because we’re still to be seen on the first half, as you said, roughly €100 million is still to be seen the performance of U.S. and Brazilian real and in our case, but maybe bigger on the second half they expected impact of FX if of course, our current forecast of currencies, will be that, but I will go to more than double the impact on the second half for FX on revenues, of course.

Thank you. We now have the next question from Supriya Subramanian from UBS. So Supriya, please go ahead when you’re ready.

Yes. Hi, good evening. Thank you for taking my question. I had to – if I may, one is on the situation in India. So, of course, the markets, the environment is quite challenging right now. Just wanted to check what’s your thoughts on one, as a market, and two, wanted to know if you use India as a potential manufacturing hub for exports and is that likely to be challenged as well? And my second one was on the revenue guidance. You also cited certain execution delays is for those that are not related to let’s say driven by the client is there any risk of any potential liquidated damages in project et cetera. Thank you.

May, if I can take them one by one of course, India, I start with India the situation there and I assume we all follow that in the general use. And general use is of course dramatic and not easy with regards to COVID, and that of course influences also our business even though not that dramatically as humans, sometimes things if you see the pictures from there. And if we go to the market in India, we anyway had already downgraded or reduced our expectations of the Indian market. That also led to a clear downscaling of our own activities. We close the factory actually we close two factories there, because the expectations for the Indian market in the short and medium term were much lower than maybe a while back. And what also progresses them pretty well is the change of our platform. We change from the 2-megawatt machines, where we still have ongoing projects, which we have about to complete remaining projects and took to get signed and then completed. We’ll now offer and negotiating them. The 3-megawatt 145 machines for and this finds a good acceptance in the market. Also the scope adjustment, which means no project development anymore, but just turbines and support that works also very well with that machine. So generally, the market is in is performing, and it’s delivering what we expected. And even though everything on a much lower level than it might have been a few years ago. And yes, and we will also use, you ask the second question whether we’ll use India as an export opportunity. Yes, we will do that. And one of the potential markets is of course, the U.S. market, where our factory in the south of India, in Mamandur would be an excellent opportunity. And then the second question was on the revenue guidance and you asked whether there’s any project delays that might cause LDs? Clearly, we have seen some shifts some, as I mentioned, are customer related, others are also driven by COVID effects. And what we will not see and this is I think the background of your question. And any effects like we have seen about a year ago on the northern pipeline, we were running into severe delays, and had to pay a lot of LDs than we have this year, much smaller projects, and then the effect of the project is very diverse, also not always our fault and therefore the liquidated damages, if at all will be of limited nature.

We now have another question from Sebastian Growe from Commerzbank. So Sebastian, please go ahead.

Yes. Hi good evening, thanks for taking my questions. First one is on the guidance. Quite frankly, I was a bit surprised to see when taking down the revenue guidance by $500 million to $700 million, that this is only affecting the adjusted EBITA range by about $30 million or so. The question that I have related to this is would it be fair to say that if that hadn’t happened, that you would have rather felt comfortable with the upper end of the guidance range it sort of in line simply with what you were able to achieve in the first half i.e. the 5%? And then the second question is land Offshore, and you mentioned the ramp up from the 8-megawatts to the 11-megawatts platform. Can you give us a sense of the last timeline for the very process? And when would you be expecting Offshore to be back to normal in this way? And if I may, just really, really quickly because you talked around the ASP and your ambition to really pass on certain parts that we saw raw material that’s going to customers, obviously, you had to get order entry in the second quarter you have built an order book that is about 40% higher than eventually and you say it’s an Onshore. So demand is simply there and you just share with us the latest sort of developments of the discovery and this client, if you ask.

Okay. Maybe this time we do the other round guidance, and EBIT and comfortable with the 5%. Do you want to answer that Beatriz please?

Yes, you questions Sebastian, if I understood that they say we’ll maintain the €11.2 billion of the top end of the range if we will feel comfortable with the 5% as of today, because you asked the question in a different way.

I think the question that Sebastian asked was, if we haven’t had the volume effect of the downturn of the revenue, would we have felt comfortable with keeping the 5% or reaching the 5% upper and I think that’s the question Sebastian asked.

Playing the 5% that we achieve on the first half has benefited from things that ordinary course of business, but it’s still are higher than expected and concentrated on the first half as per the release of the provisions or that we did because of the improvement on the failure rates and also the reusage of some inventories that we have that also has benefited the 5%, so we’ll be comfortable with the same range of 3% to 5%, which is as we said they has a plus is, the good performance of the first half and also the ongoing LEAP initiative will continue, but also we see some potential negatives that we have already covered under sufficient, we maintain always revenue, EBIT range if you see, if you ask us how comfortable we are with range, we maintain the range, how comfortable we are, with a midpoint of the range, quite comfortable.

Good. And then I think Sebastian, you asked about the changeover of the turbine. The changeover is taking this is a both next forecast in two ways. First, we change the light production to go from the current light to the next. This is a sliding process. We do that in our book and we do that mostly in our book. And the changeover there also last time has been pretty seamless and this will take place over the next two quarters. The change of the nacelle production, we produce nearly all nacelles in the winter in Cuxhaven is planned for the last quarter. Also learning from the start of the 8-megawatt, which go inside it more or less also with the start of the production in Cuxhaven in general we opened the factory only 2018. And we feel we are much better prepared this time learning from last time. And we expect that the production is then back in full swing early next year. And then you asked about the demand. I’m not exactly sure what element of the demand, then you’re targeting we clearly see, I would say with demand across all markets, we are continuing to make proposals and firm bids from Australia to the U.S., Northern Europe also. I mentioned India, we see a good interest in the next platform that we offering there. We also continue to negotiate a number of contracts in Brazil. So overall, I would say the demand side is stable and also we have the right offers in most markets. I’m not. I hope that answers your question.

Thank you. We now have a question from Rajesh Singla from Societe Generale. And please, can you limit your questions to only ones that we have time for all participants to ask questions. Thank you.

Yes. Hi, good evening. Thanks for taking my question. Maybe if you can just elaborate a bit more on the pricing environment with respect to the raw material inflation. If I heard correctly, earlier you mentioned that you are incorporating the price inflation or cost inflation closes in the new contracts, which you are signing recently. And can you please elaborate a bit more like whether customers are happy in accepting a bit higher prices or they are comfortable in linking the contract prices with the raw material inflation for the next year? Because I believe for this year, you are well covered as far as the costs are concerned. But for next year, like what kind of response you are getting from the customers?

Yes, can we mention the response you use the word happy, happiness is probably not exactly what you see there, because it’s of course understandable. The customers have in some cases participated in auctions have firm results from auctions and then go out and ask for turbines. But on the other hand, we have also to see that the effect that we see raw materials are increasing logistics are increasing. And I think it’s – then a very normal reaction of the market that this burden gets shared amongst all players will let it be us or let it be our customers. Of course, we see how best we do that. Also it is always a question on, when is the installation. When is the signing? When us notice to proceed? So generally, I would say it’s not easy. But on the other hand, then we find acceptance for that. And I think that helps us also to mitigate that risk, even though I do not see that as received with and welcome, but that is I think, very expected reaction.

Okay, maybe a follow-up question on this. So, we are targeting a substantial improvement in margins in 2022 and 2023, given 2023 targets. So, do you see any major risk to those medium-term targets coming from raw material inflation, or we believe that raw material inflation would be manageable, and we would still be able to reach or medium-term targets of 2023?

Maybe I stopped to say that the vision that we have that we get the profitability of Siemens Gamesa between 8% to 10% that remains unchanged, then what we’re currently doing is, of course, analyzing what the raw material and what that effect has, we also see a different mix of our order book and going to the larger turbines. And we are analyzing that as we speak. We – Beatriz has also mentioned, we are going through the budget and business planning for the next three years, where we will look at that effect much deeper. And we will share the outcome of that, as mentioned already early on the call then, in our outlook that we will share with you. I think it’s a November this year.

Thank you. We now have a question from Ben Heelan from Bank of America. So, please go ahead when you’re ready, Ben.

Yes, evening, thanks for taking the question. It’s a follow on from the last question, because on the call in Q1, it was highlighted around this question around raw materials that you were relatively well protected against the impact of steel, and now for the second half of the year, you’re flagging, it is an issue. So, I’m kind of confused about what is actually changed. Could you maybe size a little bit what the actual size of the impact is from the raw material headwinds that you’re seeing in the second half of the year? And then another follow on from that question is, around hedging, can you just explain to us a little bit of actually how you hedge, so if you if you do win an order in offshore – sorry, onshore, do you immediately go out and hedge that exposure? Or do you hedge on a monthly rolling basis, just so we can kind of try to understand how to think about the impact? Thank you.

Thank you, Ben, for you call. Let me rephrase a bit, what you said. Yes, what we said on Q1, of course, was based on the visibility that we have time. For that onwards, the market has moved significantly. And also, it’s not only the usual suspect is steel and copper, we have seen also significant constraints on the supply of other raw materials, like resins, and of course, we have contracts, but that also has impacted us always going to impacted us in the coming months. What we have done, we have started early in the year, of course, with this strategy, as Andreas mentioned, trying to negotiate with clients, how much we pass on and how we make sure that we mitigate future impact on that, and it’s quite different of course, onshore and offshore for that mitigation strategy. And of course, 2021 is not sometime is not possible to cover the full volume, because of the reasons I mentioned. Regarding the hedging strategy, of course, we start with the volumes, there has been for the last months coordination plan with procurement with the Onshore team and of course, Offshore team, to make sure that we finalize the analysis on what the volumes will be, because, of course, by still on based on volume by segments or a specific platform, so is specific components, and that’s what the team has been doing for the last month to make sure that we reassess the volume that we need. And we are heading, as much as we can, sometimes, you cannot hedging the long term volumes. So the team is doing that, of course, with a view where the raw material prices will be in the coming months, because if do hedge earlier, also we can have significant impact in the coming months. I will say that the hedging strategy of the group has pay back in the past, and, of course, has provided us with significant benefits. And we foresee that will be the case in the coming months, that is still again, the team will do as they have done a great job on the hedging yesterday and help us to mitigate a portion of that impact. But as I said, we don’t have 100 coverage, so and that’s the reason we have highlighted potential risk on the second half for that reason.

Thank you. We now have a question from Sean McLoughlin from HSBC. So, please go ahead Sean, your line is open.

Good afternoon and thank you for taking my question. On profitability levels in offshore orders, I mean that the ASP, I see is diluted if I compare that to the bank defaulted to previous installations. I guess that’s partly explained by the higher rating of the turbine. And again, we know that ASP, particularly in offshore is maybe not a good indicator. I just wanted to understand a little bit about the pricing environment in offshore. Are you seeing, obviously, on one side a lot of demand? Are you seeing maybe more competition now in the 13 megawatt to 15 megawatt class for turbines? Thank you.

Yes, thank you, Sean, for the question. And I think that is, of course, a reoccurring question. Indeed, we see that there is, of course, competition because we have now three large players that is Vestas. And after now, the full integration of the former joint venture. And we have GE and we have us as market leader, I think last year, we installed around 60% of all turbines. But clearly, the projects that are coming up now for the mid-20s and Sofia is already a sign of that is extremely interesting for all three players. And we continue and Sofia is then also proof to that we continue to develop our turbines and the technology to be – to make sure that we continue to be the most competitive offer in that time period. And I think to say this, there’s no competition between three companies of that size and for the ambition would be, of course not right on the other end, I’m confident also with the scale that we have, also with the cost our results and successes that we had in the past, with the technology developments that we have, that we can compensate and keep our target, which has always been market share will offer by 50%, also in that competitive environment.

Thank you.

Thank you. We now have a question from Deepa Venkateswaran from Bernstein. So Deepa, please go ahead.

Thank you so much for taking my questions. I just wanted to check on the deferral of onshore wind order. Do you believe that that’s driven by customers also wanting to take a rain check on the commodity prices? Or is there anything structured? I mean, is it just the delay or do you see anything else going on here on onshore? Thank you.

I don’t think there’s anything special going on in onshore. The orders that we signed were developed and negotiated and over the last 12 months. And yes, you can also see the global distribution I mentioned the countries from South America with Brazil to Peru, then we have European orders. I don’t think there’s anything structurally going on in the onshore market. Of course, you have a country like India, for example, that we talked about that it’s heavily affected by the pandemic, and also the complete change of the market. There you might have regional structural effects. But otherwise, I don’t think there’s anything special.

Thank you. We now have a question from Mark Freshney of Credit Suisse. So Mark, please go ahead when you’re ready.

Hello, thank you for taking my question. Most of my questions have been answered, but one that stood out or clarification is just on the constant currency impact. Do you mean that the new guidance includes the adverse €100 million revenue impact in the first half? And you know, the doubling of that €200 million in the second half? So my question is, does the new guidance of 10.2 to 10.5 include adverse currency or should we also take currency from the first half and the second half off of that to get to the outer number?

Beatriz?

Thank you, Mark. Very good question. No, we have provided always guidance on revenue on cost of FX to make everyone consistent and not to avoid any confusion. So, current guidance is cost of FX.

Thank you. We now have a question from Katy Zhao with Morgan Stanley. So please go ahead, Katy. Your line is open.

Hi, good afternoon, or good evening. Thanks for taking my question. Most of mine have been asked now as well. But I think Andreas has maybe just a bigger picture question for you when we’re thinking about the future of the offshore industry and some of the developments that we’ve seen in auctions early this year. And I’m thinking about particularly in the UK right where we’ve had kind of new market entrants on the developer side coming in and meeting at perhaps unusual prices. Can you discuss how you kind of see that going forward? What impact do you think that has on the supply chain?

Thank you, Katy, for the question. And you’re, of course, referring to the new entrance, which is mostly seen on the lease option that we saw in the UK with the highly competitive offerings that people need to secure leases. I see this, I think I’ve recently used the word with a laughing and with a one – with two different eyes. On the one hand, I’m, of course, extremely happy that additional entries come into offshore. Offshore as a large player business, additional investors are welcome and therefore that will be driving the industry forward. And also additional competition will drive down the competitor – will increase the competitors, not the industry, and then make it even larger scale. On the other hand, the high lease prices or lease fees that have now been committed to, will of course, have an effect. On the other hand, these projects are not short-term or midterm projects, the projects that we are talking about will come online, maybe around 2029, 2030. So that is an eight to 10 years from now, maybe orders less than six years. And so there’s a lot of time for us available to deal with them to develop even more efficient turbines to bring the cost down. But so it has positive as well as effects that will put us under pressure. But we have quite some time to deal with that.

Thank you. Our final question from the phone line comes from Ajay Patel from Goldman Sachs. So, Ajay, your line is now open. Hi, there Ajay, could you just check that your line is muted locally?

Hi, thank you. Good afternoon. And thank you for taking my question. Similar to others that most of the questions been answered. I just want to double check on the net debt. Would you be basically indicating that the working capital benefits that you achieved last year, some of that reverts over the course of this year? When looking to the full year and there was a step up, I think about €230 million in the leases. Does that – is that the full extent of it? Or would we be expecting more towards the end? I’m just trying to get an idea for underlying that. And then I’m just thinking in terms of visibility as in huge amounts of orders coming this year, when – how much of like, if we were to take a little bit of a longer-term view, how much visibility do we now have? And how much of say 2025 orders do you already know? Just trying to understand this that by the end of this process or this year with the significant auctions that we have that we actually able to get to a stage where that year we actually have more visible to us and would you able to give us more visible indications on that? Thank you.

Yes, Beatriz, do you take the first one and I’ll handle the….

On the operating leases, what we’ve highlighted is the evolution of the gross that on the period are mainly relates to two factors as you said, one is the increase of the operating leases €230 million years out of which roughly €150 million comes from new contract rate to vessels that has been signed. The study of the group of course, will be always based on financial metrics. So, if we foresee that there is a benefit for the group on signing new leases will do so, with one caveat. Of course, we know that operating leases will increase our gross debt and we also know how important it is the gross debt ratio for rating agency properties. So, we will always find the balance to make sure that we find good lease financial terms, but also we maintain the gross level of the company within the range that is reasonable for the group. Regarding you know and then therefore, is with them for significant increase on operating leases on the second half, but a few more contracts will be signed. And then regain the working capital. What we meant is the performance of last year was extraordinary and very good for the group. Of course, it is difficult to maintain that level going forward. And now we have some trade liabilities that we have paid on the first quarter and so nothing else – there was nothing like we unfold the benefit of the 2022 performance this year.

And I think the second question was around visibility. And that is, of course, completely different whether you look into Onshore and Offshore. Into Onshore, the project that we currently signing will mostly be for production next year. And then make installation latest in 2023. So, and then sometimes even in 2022, about the best visibility or the let’s say, how do I say that the latest visibility would be 2023, at the moment. In Offshore that is completely different. With the signed orders, but even more so with the pipelines that we have. We have already now a few projects inside that would be 2025 – 2024, 2025. And one interesting addition is what I mentioned earlier, would be the CFD next year in the UK. And then I think we would have an excellent visibility already for the years 2024, 2025 and maybe even 2026. To give you an example of one of our rather late projects, that is, for example, the preferred bidder agreement we have for 2.5 gigawatts Dominion in the U.S. and they will be for that installation is expected in the mid-20s. I don’t know exactly the years now by heart and we will add projects to that. But no firm order yet for that period, but with the reliable transfer from preferred bidder into orders. And I think we have that. But if you do the other way around 8-gigawatts already now clear 7.5 gigawatts more to come. The visibility in offshore is of course excellent and longer reach than an onshore. I assume that was the last question if I understand it. Right.

More questions, please?

I think we can perhaps conclude the call Andreas, if you want to conclude.

Yes, yes. Okay. Thank you. And first I would like to thank everyone and for attending our call on this unusual time. And also, actually the questions show, there was, of course, a higher interest also in the areas where we expected it and where was naturally to get the questions that was raw material and guidance that was clear to us. And that is also why we immediately said that already went planning that we would like to share that with you immediately. s And overall, I think it was, as I said at the beginning and as we also explained a good quarter for Siemens Gamesa, also the order entry, the outlook, the growth that we can currently see is confirming that we are on the right track, notwithstanding that the entrepreneur on will – still take time is still a lot of work to be done. But on the other hand, I believe we make progress. And I hope we can also show that to you and you can see that in our numbers. So from that point of view, I hope it was worthwhile for all of you to attend. And I wish you a nice weekend. And I’m sure with many of you, we will talk in the upcoming roadshow. So many things, and have a good weekend.

Ladies and gentlemen that does conclude today’s call. Thank you all again for joining. You may now disconnect your lines.